WASHINGTON-NextWave Telecom Inc. shut down its Southeast and Midwest operations last week, the first wave of what could be a nationwide reduction in force that could cut the C-block personal communications services licensee’s 380-member staff significantly in the near future.
Allen Salmasi, NextWave chairman and chief executive officer, sent the following e-mail to all NextWave employees May 22 regarding the situation: “In keeping with our plans to focus on customer priorities and to minimize the financial impact on our continuing operations, we have made the agonizing decision to restructure our operations and to reduce our team in the Southeast (Florida) region and the Midwest region effective Wednesday, May 21, and Thursday, May 22. We have concluded that this shift is necessary in order to conserve resources and to meet our strategic objectives for the balance of the year. Please know that we are doing everything possible to minimize the impact of this reorganization on our associates and their families.”
Salmasi continued, “In the meantime, I would like to extend my personal thanks to each of you for the invaluable contributions you are making to NextWave. The company has achieved so many major milestones as a direct result of your efforts. Unfortunately, NextWave continues to face a number of obstacles, which makes it necessary for the company to restructure its operations.”
The company plans to make an announcement early this week explaining last week’s actions and to go into some future detail.
A San Diego-based NextWave management team released 28 employees ranging from engineers to marketers in its Southeast region encompassing Jacksonville, Orlando and Tampa, Fla., last Tuesday; and 25 employees in the Midwest operation (which includes 13 basic trading areas in Ohio and Indiana) were visited last Thursday in Cleveland; all employees were given a severance package.
According to one laid-off employee, who spoke to RCR on terms of anonymity, NextWave officials told workers in the Florida office to pack up their belongings. There was no warning, the source said, and no explanation. “We feel like we’ve been slighted.”
NextWave spokeswoman Jennifer Walsh dismissed any talk about a possible bankruptcy as speculation, even though the path NextWave is taking is similar to the one followed by Pocket Communications Inc. last March, prior to its filing for Chapter 11 reorganization. NextWave attorney Tom Gutierrez told RCR that NextWave was instituting “a significant reduction in force” to prevent a possible bankruptcy. In fact, he said, NextWave had just given his firm, Lukas, McGowan, Nace & Gutierrez, several new projects. “But bankruptcy is not an out-of-the-blue issue, either,” he added.
NextWave’s new RIF policy, according to Gutierrez, affects its buildout only, and there would be changes at the field, contractor and technical levels. Walsh added the company would concentrate on building out the markets that its top resellers want to serve first: Los Angeles, New York and Dallas, for example. At some time, when its financial situation allows, NextWave will consider reopening its Southeast and Midwest markets, but at this time they are considered to be a lower priority.
David Kaufman of Brown, Nietert & Kaufman, which represents two C-block players that have petitions regarding NextWave’s licenses pending at the Federal Communications Commission, said the layoffs might be a result of investor uneasiness with NextWave’s financial situation or perhaps due to another default of a covenant. So far, the company has announced no new financing ventures, and its initial public offering still has not been a go. Because of the amount of money NextWave is saving due to a recent FCC action that has put both its license payments and its six-month reorganization plan on more lenient time schedules, Kaufman agreed that bankruptcy probably is not a near-term concern.